Initial Direct Cost (IDC) includes which description?

Initial Direct Cost (IDC) includes which description?

• A. False
• B. Partially true
• C. Only if the lease is non-cancelable
• D. True

Answer: (D)

Initial Direct Costs are the incremental costs that are directly attributable to negotiating and arranging a lease and that would not have been incurred if the lease had not been obtained. These costs are included in the initial measurement of the right-of-use asset (for the lessee) or the lease receivable (for the lessor). Examples include commissions and legal fees tied specifically to obtaining the lease. They do not include general overhead or internal costs that would have been incurred regardless of whether the lease was secured. The fact that a lease is noncancelable does not determine whether a cost qualifies as IDC. Therefore, the description described is correct.

Initial Direct Costs are the incremental costs that are directly attributable to negotiating and arranging a lease and that would not have been incurred if the lease had not been obtained. These costs are included in the initial measurement of the right-of-use asset (for the lessee) or the lease receivable (for the lessor). Examples include commissions and legal fees tied specifically to obtaining the lease. They do not include general overhead or internal costs that would have been incurred regardless of whether the lease was secured. The fact that a lease is noncancelable does not determine whether a cost qualifies as IDC. Therefore, the description described is correct.